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Texas Mutual Insurance Co. v. Kinsale Insurance Co.

United States District Court, W.D. Texas

November 20, 2019

TEXAS MUTUAL INSURANCE COMPANY, Plaintiff
v.
KINSALE INSURANCE COMPANY, Defendant

          REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          SUSAN HIGHTOWER, UNITED STATES MAGISTRATE JUDGE

         TO: THE HONORABLE LEE YEAKEL, UNITED STATES DISTRICT JUDGE

         Before this Court are Kinsale's Opposed Motion for Leave to File Amended Answer to Assert Counterclaim, Instanter, filed August 6, 2019 (Dkt. No. 16); Plaintiff's Opposed Motion to Dismiss, filed August 13, 2019 (Dkt. No. 18); and the Response and Reply Briefs. On September 10, 2019, the District Court referred the above motions to the undersigned Magistrate Judge for Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas.

         I. BACKGROUND

         Plaintiff Texas Mutual Insurance Company (“Texas Mutual”) issued a Texas workers' compensation and employers' liability insurance policy to Quality South Texas Trucking, Inc. (“Quality Trucking”), with a policy period from August 18, 2017 to August 19, 2018 (“Texas Mutual Policy”). Defendant Kinsale Insurance Company (“Kinsale”) issued a commercial general liability insurance policy to Quality Trucking, with a policy period from August 18, 2017 to August 18, 2018 (“Kinsale Policy”). Both Parties contend that they have no duty to defend in an underlying state negligence lawsuit.

         A. The Underlying Lawsuit

         In October 2017, SM Energy Company and Trinidad Drilling hired Quality Trucking to move a large drilling rig from Catarina, Texas, to a nearby location. Quality Trucking hired Steven Martinez to help move the drilling rig. On November 3, 2017, during the drilling rig move, Mr. Martinez was seriously injured when his right leg was crushed by a crane operated by Fred Gonzalez, the owner of Quality Trucking. Mr. Martinez underwent five major surgeries, and ultimately had to have his right leg amputated.

         On January 26, 2018, Mr. Martinez and his wife, Bertha Martinez, individually and as next friends of their children (the “Martinez Plaintiffs”), filed their first negligence lawsuit against Quality Trucking, Trinidad Drilling, SM Energy Company, and Fred Gonzalez. See Martinez v. Trinidad Drilling, No. 18-01-1335-DCVAJA (365th Dist. Ct. Dimmit County, Tex. Jan. 26, 2018).

         Once notified of the underlying lawsuit, Texas Mutual informed Quality Trucking that it had no duty to defend Quality Trucking in the lawsuit because the Texas Mutual Policy “covers only bodily injury arising out of and in the course of an injured employee's employment by the insured.” Dkt. No. 1-1 at ¶ 11. Because Mr. Martinez had not alleged that he was an employee of Quality Trucking, Texas Mutual took the position that there was no coverage under the Policy. When Quality Trucking informed Texas Mutual that Kinsale had also denied coverage under the Kinsale Policy, however, Texas Mutual agreed to defend Quality Trucking and Mr. Gonzalez in the lawsuit “with gratuitous defenses as business courtesy.” Id. at ¶ 12.

         Subsequently, Texas Mutual notified Kinsale that Kinsale had the sole duty to defend Quality Trucking in the lawsuit because the Martinez Plaintiffs sought damages for bodily injuries and Mr. Martinez was not an employee of Quality Trucking. Kinsale denied it had a duty to defend the lawsuit, contending that Texas Mutual was under a duty to defend.

         The Martinez Plaintiffs eventually non-suited their first state court action and, on June 14, 2018, re-filed the case in Webb County. See Martinez v. Trinidad Drilling, No. 001195-D3 (341st Dist. Ct. Webb County, Tex. June 14, 2018) (“Underlying Lawsuit”). Mr. Martinez specifically alleged in the Underlying Lawsuit that he was hired as “an independent contract driver, ” and that he “was not an employee of [Quality Trucking and Mr. Gonzalez] at the time he sustained his injuries.” Dkt. No. 1-1 at Exh. D, p. 3.

         On January 15, 2019, Texas Mutual again contacted Kinsale and requested that Kinsale defend Quality Trucking in the Underlying Lawsuit. Again, Kinsale took the position that it had no duty to defend because Quality Trucking was covered under the Texas Mutual Policy. Id. at Exh. C.

         B. The Instant Lawsuit

         On April 17, 2019, Texas Mutual filed the instant lawsuit against Kinsale in state court, seeking a declaratory judgment under the Texas Uniform Declaratory Judgment Act that “it has no duty to defend” and that Kinsale does have a duty to defend Quality Trucking in the Underlying Lawsuit. See Texas Mutual Ins. Co. v. Kinsale Ins. Co., No. D-1-GN-19-002114 (126th Dist. Ct. Travis County, Tex. Apr. 17, 2019). Texas Mutual ...


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